No Consensus on Pay Rates for Rooftop Solar Electricity

This is the final installment of our ongoing coverage of MPSC’s Solar Working Group. See the entire series here.

While on-site solar development booms in Minnesota due to strong state policies, Michigan’s sun power sector languishes due to zero state support and resistance from its two largest utilities. (Photo: www.bluehorizonsolar.com)

Four months of meetings have failed to produce an agreement among state regulators, solar energy advocates, and the state’s top two utilities about expanding the companies’ highly popular customer-owned rooftop solar programs.

But even as DTE Energy and Consumers Energy prepare to drop their tiny pilot programs, pressure is building on both firms to reverse course and embrace rooftop solar in their future generation plans. That, advocates point out, would help Michigan catch up with other Midwestern states cashing in on the rooftop solar boom, which accounts for many of the sector’s 143,000 American jobs.

The failure of the Michigan Public Service Commission’s Solar Working Group to reach consensus on next steps for rooftop solar development stems directly from the two utilities’ flat rejection of a slew of studies by regulators, lawmakers, and researchers in other states finding that rooftop solar’s electricity is highly valuable to utilities because it helps them save on certain operational and capital costs.

The studies say that, because of those savings—called “avoided costs” or the “value of solar”—it makes good economic sense for utilities to pay slightly higher prices for rooftop power than they do for wind-, coal-, or gas-driven power plants. The utilities and the customers both come out ahead, according to the analyses.

That, advocates point out, also confirms the fairness of Michigan’s net metering law, which the companies dislike because it requires them to credit their panel-owning customers for the solar power they produce at standard retail rates.

In comments for the MPSC’s final report on the working group, the two utilities, who promised at the beginning of the Solar Working Group process to “listen and learn” about possible next steps, insisted that net metering—as well as rate payments based on the most-accepted value of solar calculations—amount to unfair “cross subsidies” that force non-solar customers to cover charges that customers with panels escape because their bills are so low.

To reinforce its point, DTE presented its own value of solar calculation; it was barely one-third what most studies indicate is a fair, market-based price.

That drew a mild rebuke from MPSC staff and sharp responses from a number of working group members. Several solar advocates also strongly rejected claims by the utilities that solar panel owners are being unfairly subsidized by non-solar customers.

Debating Solar’s True Value

MPSC said that in order to arrive at a credible value of solar number, or to correctly determine whether net metering really did amount to an unfair “cross subsidy,” it would be necessary to obtain more information from the companies.

Solar advocates largely agreed with MPSC and urged it to get the information and execute a full study.

Brad Klein, an attorney for the Environmental Law and Policy Center, who is coordinating efforts to require the two utilities to help their customers invest in more rooftop solar, spoke more sharply against DTE’s calculation.

He said that the utility’s effort “highlights how far out of step DTE’s position (is) with other utilities and independent experts across the country.”

“There’s no credible evidence to support DTE’s argument that Michigan-built solar is worth only 28 percent of the value of Minnesota-built solar or that independent National Renewable Energy Laboratory researchers somehow overestimated Michigan’s solar value by 350 percent,” Klein wrote in his final comments to MPSC.

Wayne Appleyard, a member of the Ann Arbor Energy Commission, while not speaking for that group, challenged the utilities’ near-constant complaint about solar subsidies.

“Much, if not all of what the utilities do have some subsidy attached to it,” he said in an email to the MPSC.

“All we are asking for is that some individual who puts solar on their home at least get a return on their investment. Not anywhere near the return that DTE is getting on the nuclear plant that they could only build because the U.S. government gave them free insurance that they couldn't buy [because] no insurance company would provide them at any price … if ‘subsidies’ become an issue, they need to be looked at across the board.”

But in their own comments for the final MPSC report, both utilities said they would resist calls to either expand net metering or use value of solar calculations to fashion new rooftop solar programs.

DTE reiterated that it was only interested in voluntary customer solar programs that did not involve its own money, saying such programs must be “based on the actual costs of solar and these costs would be entirely recovered by customers who participate.” But the utility did not explain how that would occur.

Consumers’ comments were slightly more conciliatory, suggesting a new program design that would base payments on DTE’s limited view of avoided costs. It promised “to combine the lessons from the Solar Work Group with our experiences from the [pilot] to propose a renewable customer self-generation tariff [i.e., rate] and an expandable community solar program design by the end of 2014.”

That pressure began late last year, when MPSC and the Michigan Energy Office released a report finding that solar energy is a viable resource in the state.

Last month, responding to that report and the Snyder administration’s push to update state energy policy, a working group led by state Senator Mike Nofs began considering next legislative steps for advancing renewables.

Meanwhile, a bipartisan group in the state House proposed four “Energy Freedom” bills making it easier for Michiganders to invest in their own energy sources, including solar power.

Further increasing the pressure is MPSC’s confirmation that DTE and Consumers have enough money in their renewable energy funds to greatly expand their about-to-crash solar pilots without noticeably increasing rates. MPSC also delayed final approval of the solar energy portion of Consumers’ bi-annual renewable energy plan, indicating that the working group report would affect commissioners’ final decision.

The agency also placed the final report in both utilities’ regulatory dockets, where it will provide reference material for future decisions about both companies’ renewable energy plans.

Meanwhile, solar advocates continue their drumbeat for developing more sun power—circulating petitions; sending letters of support to the governor, MPSC, and the utilities; and using social media to urge constituents to act.

The advocates added that it is crucial to act quickly on expanding the utilities’ solar-friendly programs, before a vital 30-percent federal tax credit expires.

Many advocates also added more urgency to the discussion by pointing out that, until better policies are in place, Michigan’s economy will suffer.

“Michigan is falling behind on solar energy development as compared to other states,” John Freeman, of Homeland Solar, pointed out in his final comments to the commission. “States like California, New Jersey and New York are moving ahead with supportive policies to expand their solar industries and markets. These States have seen significant benefits from an expanded solar economic sector including a large growth in job creation; homeowners and business have seen major savings in electricity cost, which can then be utilized in other strategic ways; and the environment has benefitted from less reliance on coal-generated power.”

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist. Reach him at jimdulzo@mui.org.

About the Author

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy adviser. Reach him atjimdulzo@mlui.org.